Deckers Outdoor Corporation (NYSE:DECK), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$440 and falling to the lows of US$331. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Deckers Outdoor's current trading price of US$347 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Deckers Outdoor’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Deckers Outdoor worth?
According to my valuation model, the stock is currently overvalued by about 30%, trading at US$347 compared to my intrinsic value of $267.27. This means that the opportunity to buy Deckers Outdoor at a good price has disappeared! Furthermore, Deckers Outdoor’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Deckers Outdoor generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Deckers Outdoor's earnings over the next few years are expected to increase by 32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in DECK’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DECK should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DECK for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for DECK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Deckers Outdoor at this point in time. For example - Deckers Outdoor has 2 warning signs we think you should be aware of.
If you are no longer interested in Deckers Outdoor, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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